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Petroleum co’s shares fall as fears rise Iraqi Kurdistan-focused oil shares hit by IS advance

LONDON, Aug 7, (RTRS): Shares in energy companies operating in Iraqi Kurdistan plummeted on Thursday after Islamic State militants advanced closer to oilfields in the semi-autonomous region. Oil producers, including Oslo-listed DNO Petroleum and London-listed Gulf Keystone Petroleum saw double-digit declines in their share prices as the radical Sunni militants seized at least three more towns near Kurdish-controlled territory. While the firms said their Kurdish fields continued to operate, there are growing concerns about the security risks faced by firms active in Iraqi Kurdistan, seen as a beacon of relative stability in the region. Shares in Oslo-listed oil producer DNO fell up to 24 percent and London-listed Gulf Keystone Petroleum was down 13 percent at their lowest point on Thursday, before paring losses. Kurdistan oil producer Genel Energy also saw a 6 percent fall in its shares traded in London.

“Investors are now taking into account the risk,” ABG Sundal Collier analyst Oeyvind Hagen said, adding it remained difficult to judge how far into the Kurdish region the islamists could penetrate. Gulf Keystone said it had increased security at its flagship Shaikan field, Iraqi Kurdistan’s largest, but added that production and trucking operations were continuing safely. DNO operates the Tawke field, in which Genel is also a partner, which produces around 120,000 barrels of oil per month. Other Kurdistan oil producers including London-listed Afren and Toronto-listed Oryx Petroleum — which operates the fields closest to the militants advance — declined to comment.
Two car bombs killed nine people in the Kurdish-held Iraqi oil city of Kirkuk on Thursday, police and medical sources said. Energy companies have flocked to Iraqi Kurdistan in recent years, hoping to access what is believed to be one of the world’s last huge conventional onshore oil deposits. The regional capital Arbil houses many western oil workers and executives, and has seen an investment boom despite tensions with Baghdad over the control of oil sales and revenues. Most worrying for investors this week has been the pullback of the Kurdistan Regional Government’s peshmerga soldiers. Facing militants freshly armed with US-made heavy weapons seized from the Iraqi army, the peshmergas have given up several towns since Sunday.
Witnesses on Thursday said the militants had seized the town of Makhmur, around 40 kms from the regional capital Arbil, but Kurdish officials told local media their forces remained in control there and television channels broadcast footage of peshmerga fighters driving around the town. The militant group said in a statement on its Twitter account that its fighters had seized 15 towns, the strategic Mosul dam on the Tigris River and a military base. DNO, which describes its prospects in Iraqi Kurdistan as ‘the jewel in the crown’ on its website, was the first international energy company to enter the Iraqi Kurdistan region in 2004. Production from the region accounted for 55 percent of its revenue last year. “We continue to conduct operations at all DNO sites throughout Kurdistan within our established security protocols,” a spokesman said in an emailed comment.
“Needless to say, we are in regular contact with the authorities and closely monitor developments.” The shares plunged on news of the insurgents’ advance, dropping by 24 percent to 14.03 Norwegian crowns. By 1145 GMT the shares stood at 16.52 crowns, down 10 percent. DNO operates the Kurdish Takwe field not far from Iraq’s Turkish border, and plans to ramp up production at its biggest asset by 200,000 barrels per day by year-end. It also operates the Arbil licence, which contains the small Bastora field, which is among the assets closest to the fighting.
“Investors are now taking into account the risk that DNO will get problems with its Tawke production,” ABG Sundal Collier analyst Oeyvind Hagen said, adding it remains difficult to judge how far into the Kurdish region the Islamists might penetrate. The value of the Tawke field alone should, under normal circumstances, be around 20 crowns per DNO share, while the firm’s other fields in the Kurdish region could be worth an additional 2 crowns per share, Hagen said. “So far the Islamic State have been the stronger force, and fears are growing with regards to what the consequences will be unless the Kurdish peshmerga forces are able to form a front,” he said.

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